Negotiations are under way between General Motors (GM) and Sichuan Tengzhong Heavy Industrial Machinery over the proposed purchase of Hummer, and the deal is a perfect fit according to GM’s CEO Jim Taylor.
“Tengzhong will get an auto business and GM will get the brand off its books,” Taylor said.
All I need is cash, Taylor said. We were looking for companies with the resources to fund our future development and keep the brand and dealers alive. I'll bring all to the table.
Taylor expects the deal to be done by the end of the third quarter and, although he refused to discuss the amount of money involved, he told China Daily that cash-strapped GM Corp had set financial clout as the main criteria for bidders.
China's Tengzhong, which was virtually unknown before its controversial takeover bid of Hummer, said it has the financial resources and expertise to clinch the deal last week. It signed a preliminary agreement with the GM to acquire its Hummer brand for an undisclosed price.
The public should not judge a private company's financial capability from its registered capital. We have the financial resources for the Hummer deal from our own capital and also funding from some financial institutions, said Yi Yang, general manager, Tengzhong.
If sold to Tengzhong, the brand will belong to a foreign company with no background in car manufacturing. But Taylor said the Chinese firm was happy to simply pay the bills and leave the vehicle-end of operations to Hummer's existing management, engineering, marketing and advertising teams.
“We have full confidence in Hummer's current management team, Yang said.
“The Hummer of tomorrow is not as the same as the Hummer of today, he said. It has to be more fuel efficient, it is a must, and with an (new) investor we are going to change the image of Hummer.
Tengzhong said it will sign a long-term contract with GM on the assembly, spare parts and material supplies for the transferred Hummer.
Yang also said that Tengzhong would also invest in research and development of a new powertrain system to help improve the gas guzzler's fuel efficiency.
If Tengzhong moves the Hummer lines to China, it will find it difficult to get the vehicles onto United States soil. But Tengzhong has no plans to move the Hummer manufacture to China, said Yang.
Analysts say the purchase will help the four-year-old company boost its image in China and abroad, while GM will get the brand off its books according to Taylor.